Earnings call transcript: LendingClub Q3 2025 earnings beat expectations

LendingClub Corp posted a strong performance in the third quarter of 2025, surpassing analyst expectations with a significant earnings surprise. The company reported an earnings per share (EPS) of $0.37, beating the forecast of $0.30, reflecting a 23.33% positive surprise. Revenue reached $266.2 million, exceeding projections of $256.29 million. Following the earnings announcement, LendingClub’s stock surged by 9.15% in after-hours trading, closing at $18.25.

Key Takeaways

• LendingClub’s EPS of $0.37 exceeded forecasts by 23.33%.
• Revenue grew by 32% year-over-year, reaching $266.2 million.
• Stock price increased by 9.15% in after-hours trading.
• Net interest income hit a record $158 million.
• Strong market position with 37% growth in loan originations.

Company Performance

LendingClub demonstrated robust financial performance in Q3 2025, with significant growth in key areas. The company’s total loan originations increased by 37% year-over-year, reaching $2.62 billion. This growth was complemented by a 32% rise in revenue and a 58% increase in pre-provision net revenue, highlighting the company’s operational efficiency and expanding market presence.

Financial Highlights

• Revenue: $266.2 million, up 32% year-over-year
• Earnings per share: $0.37, nearly tripling from the previous period
• Net interest income: $158 million, a record high
• Return on Tangible Common Equity (ROTCE): 13.2%
• Marketplace revenue: 75% growth, highest level in three years

Earnings vs. Forecast

LendingClub’s Q3 2025 EPS of $0.37 significantly surpassed the analyst forecast of $0.30, marking a 23.33% earnings surprise. Revenue also exceeded expectations, coming in at $266.2 million against a forecast of $256.29 million, a 3.87% surprise. This performance reflects the company’s strong operational execution and strategic growth initiatives.

Market Reaction

Following the earnings announcement, LendingClub’s stock experienced a notable increase of 9.15% in after-hours trading, closing at $18.25. This surge indicates positive investor sentiment, driven by the company’s impressive earnings beat and robust financial performance. The stock’s movement is particularly significant given its current position within a 52-week range of $7.90 to $19.88.

Outlook & Guidance

Looking ahead, LendingClub expects Q4 2025 loan originations to range between $2.5 billion and $2.6 billion, representing 35-41% year-over-year growth. The company also anticipates pre-provision net revenue of $90-$100 million and a ROTCE of 10-11.5%. Additionally, LendingClub is planning further balance sheet growth and marketplace expansion, with new product developments expected in early 2026.

Executive Commentary

CEO Scott Sanborn commented, "We delivered another outstanding quarter with 37% growth in originations, 32% growth in revenue and a near tripling of diluted earnings per share." CFO Drew Ben added, "Our goal is to grow originations enough that we can feed all of our desires to grow the balance sheet."

Risks and Challenges

• Competitive consumer lending market may pressure margins.
• Potential economic downturn could impact borrower creditworthiness.
• Regulatory changes in financial services could affect operations.
• Increased marketing spend may not yield expected growth.
• Maintaining conservative underwriting standards amidst growth.

Q&A

During the earnings call, analysts focused on LendingClub’s loan disposition strategies and marketing efficiency. Executives addressed potential credit quality concerns and discussed future product and branding developments. These discussions highlighted the company’s strategic focus on maintaining strong credit performance and expanding its customer base.

Full transcript - LendingClub Corp (LC) Q3 2025:

Conference Operator: Ladies and gentlemen, thank you for joining us, and welcome to the LendingClub Q3 twenty twenty five Earnings Conference Call. After today’s prepared remarks, we will host a question and answer session. I will now hand the conference over to Artem Nelavaiko, Head of Investor Relations. Please go ahead.

Artem Nelavaiko, Head of Investor Relations, LendingClub: Thank you, and good afternoon. Welcome to LendingClub’s third quarter twenty twenty five earnings conference call. Joining me today to talk about our results are Scott Sanborn, CEO and Juleh Ben, CFO. You can find the presentation accompanying our earnings release on the Investor Relations section of our website. On the call, in addition to questions from analysts, we will also be answering some of the questions that were submitted for consideration via e mail.

Our remarks today will include forward looking statements, including with respect to our competitive advantages, demand for our loans and marketplace products and future business and financial performance. Our actual results may differ materially from those contemplated by these forward looking statements. Factors that could cause these results to differ materially are described in today’s press release and earnings presentation. Any forward looking statements that we make on this call are based on current expectations and assumptions and we undertake no obligation to update these statements as a result of new information or future events. Our remarks also include non GAAP measures related to our performance, including tangible book value per common share, pre provision net revenue and return on tangible common equity.

You can find more information on our use of non GAAP measures and a reconciliation to the most directly comparable GAAP measures in today’s earnings release and presentation. Finally, please note all financial comparisons in today’s prepared remarks are to the prior year end period unless otherwise noted. And now I’d like to turn the call over to Scott.

Scott Sanborn, CEO, LendingClub: Thank you, Artem. Welcome, everybody. We delivered another outstanding quarter with 37% growth in originations, 32% growth in revenue and a near tripling of diluted earnings per share. Innovative products and experiences, compelling value propositions of 5,000,000 strong member base, consistent outperformance on credit, and a resilient balance sheet are all coming together to deliver sustainable, profitable growth. I’m excited to share more on our vision and our many competitive advantages at our upcoming Investor Day in two weeks, so I’ll keep it brief today.

Quarterly originations of 2,620,000,000 came in above the top end of our guidance, reflecting strong demand from both consumers and loan investors, our increased marketing efforts, and the power of our winning value proposition in customer experiences. With competitive loan rates enabled by our sophisticated credit models and a fast frictionless process, we continue to be very successful at attracting our target customers. In fact, when our loan offers are made side by side in a leading loan comparison site, we close 50% more customers on average than the competition. We continue to be disciplined in our underwriting. Our asset yield remains strong and our borrower base continues to perform well.

In fact, we’re delivering our originations growth while also demonstrating roughly 40% outperformance on credit versus our competitor set. Consistent strong credit performance on a high yielding asset class has allowed us to confidently build our balance sheet, which now stands at over $11,000,000,000 delivering a durable, resilient revenue stream that non banks can’t replicate. In fact, this quarter, we generated our highest ever net interest income of $158,000,000 enabled by a growing balance sheet and expanding net interest margin. Our loan marketplace is also thriving with our reputation for strong credit performance and innovative solutions attracting marketplace investors and improving loan sales prices. We grew marketplace revenue by 75% to our highest level in three years and had our best quarter ever for structured certificate sales totaling over 1,000,000,000.

We also secured earlier in the quarter a memorandum of understanding by which funds and accounts managed by BlackRock would purchase up to 1,000,000,000 through LendingClub’s marketplace programs through 2026. What’s more, our new rated product specifically designed to attract insurance capital is capturing strong interest, which should help us to continue to improve loan sales prices and further boost marketplace revenue. As excited as I am about our financial performance, I’m equally excited about what we’re seeing in member engagement and behavior. Our mobile app combined with high engagement products and experiences like LevelUp checking and Dead IQ are successfully encouraging members to visit us more often and are driving new product adoption. We launched LevelUp checking in June as the first of its kind banking product designed specifically for our borrowers.

Members are responding positively with a seven x increase in account openings over our prior checking product. In a recent survey, 84% of respondents said they were more likely to consider a LendingClub loan given the offer of 2% cash back for on time payments through LevelUp checking. And what’s really encouraging is that nearly 60% of new accounts being opened are being opened by borrowers. Our efforts are driving a nearly 50% increase in monthly app logins from our borrowers and with that engagement an increasing portion of our repeat loan issuance is now coming through the app. That’s proof that these investments are enabling lower cost acquisition from repeat members, keeping pace with our new member growth as we continue to ramp our marketing efforts.

We’ll share more examples at Investor Day of how our intentional product design coupled with an engaging mobile experience are creating a flywheel to increase lifetime value. Before I turn it over to Drew, I wanna thank all LendingClubbers for their incredible execution and dedication to improving banking for our more than 5,000,000 members. Their efforts are paying off and I look forward to building on our momentum. With that, I’ll turn it over to you Drew.

Drew Ben, CFO, LendingClub: Thanks Scott and good afternoon everyone. We delivered another outstanding quarter extending the momentum we built throughout the first half of the year. For the third quarter, we generated improved results across all key measures including originations, revenue, profitability and returns. Total originations grew 37 year over year to over $2,600,000,000 reflecting the impact of our growth initiatives, scaling of our paid marketing channels and continued expansion of loan investors on our marketplace platform. Revenue grew 32% to $266,000,000 driven by higher marketplace volume, improved loan sales prices and expanding net interest income.

Pre provision net revenue or revenue less expenses grew 58% to $104,000,000 reflecting the scalability of our model. The net impact of all these items is that we nearly tripled both diluted earnings per share and return on tangible common equity to $0.37 per share and 13.2% respectively. The business is firing on all cylinders demonstrating the earnings power of our digital marketplace bank model. Now let’s turn to Page 12 of our earnings presentation, where we will go further into originations growth. We delivered our highest level of originations in three years.

Borrower demand remains strong as the value we are providing in the core use case of refinancing credit card debt continues to be compelling. Loan investor demand also remained strong with marketplace buyers looking to increase orders and prices steadily improving. Demand for our structured certificate program continues to grow as we added the rate of product attracting new insurance capital. In addition to $1,400,000,000 of new issuance sold, we also sold $250,000,000 of seasoned loans out of the extended seasoning portfolio, which included a rated transaction supported by insurance capital. Our consistently strong credit performance sets us apart from the competition and is one of the reasons we have been able to sell all of these loans without any need to provide credit enhancements.

Leveraging one of the benefits of being a bank, we grew our held for sale extended seasoning portfolio to over $1,200,000,000 consistent with our strategy to grow our balance sheet, while maintaining an inventory of seasoned loans for our marketplace buyers. Finally, we retained nearly $600,000,000 on our balance sheet in Q3 in our held for investment portfolio. Now let’s turn to the two components of revenue on Page 13. Non interest income grew 75% to $108,000,000 benefiting from higher marketplace sales volumes, improved loan sales prices, continued strong credit performance and lower benchmark rates. The fair value adjustment of our held for sale portfolio benefited by approximately $5,000,000 in the quarter from lower benchmark rates.

Net interest income increased to $158,000,000 another all time high supported by a larger portfolio of interest earning assets and continued funding cost optimization. The growth in this important recurring revenue stream is expected to continue into the future as we leverage our available capital and liquidity to further grow the balance sheet. If you turn to Page 14, you will see our net interest margin improved to 6.2%. We continue to see healthy deposit trends and total deposits ended the quarter at $9,400,000,000 a slight decrease from last year. The change was primarily attributable to a $600,000,000 decrease in brokered deposits, which was mostly offset by an increase in relationship deposits.

Level Up savings remains a powerful franchise driver approaching $3,000,000,000 in balances and representing the majority of our deposit growth this year. We are maintaining a disciplined approach to deposit pricing, while providing meaningful value for our customers. Turning to expenses on Page 15, non interest expense was $163,000,000 up 19% year over year. As we signaled last quarter, the majority of the sequential increase was driven by marketing spend as we continue to scale, test and optimize our origination channels to support continued growth in 2026. We continue to generate strong operating leverage on our growing revenue and our efficiency ratio approached all time best in the quarter.

Let’s move on to credit where performance remains excellent. We continue to outperform the industry with delinquency and charge off metrics in line with or better than our expectations. Provision for credit losses was $46,000,000 reflecting disciplined underwriting, stable consumer credit performance and portfolio mix. Our net charge off ratio improved modestly again this quarter to 2.9% and we continue to see strong performance across our vintages. I would highlight that the net charge off ratio also continues to benefit from the more recent vintages we’ve added to the balance sheet.

We expect the charge off ratio to revert upwards to more normalized levels as these vintages mature. These anticipated dynamics are already factored into our provision. On Page 16, you will see that our expectation for lifetime losses are also stable to improving across all vintages. Turning to the balance sheet, total assets grew to $11,100,000,000 up 3% compared to the prior quarter. Our balance sheet remains a competitive strength, allowing us to generate recurring revenue through retained loans, while maintaining the flexibility to scale marketplace volume as loan investor demand grows.

We ended the quarter well capitalized with strong liquidity and positioned to fund future growth without raising additional capital. Moving to Page 17, you can see that pre tax income of $57,000,000 more than tripled compared to a year ago and hit a record high for the company. Taxes for the quarter were $13,000,000 reflecting an effective tax rate of 22.6%. We continue to expect a normalized effective tax rate of 25.5%, but we may have some variability in this line due to the timing of stock grants and other factors. Putting it all together, net income came in at $44,000,000 and diluted earnings per share were $0.37 which nearly tripled compared to a year ago.

Importantly, our return on tangible common equity of 13.2% showed continued improvement and came in above the high end of our guidance range and our tangible book value per share now sits at $11.95 As we look ahead, the business enters the fourth quarter with significant momentum. Loan investor demand remains strong, loan sales pricing continues to trend higher and our product and marketing initiatives are driving high quality volume growth. As a reminder, in Q4, we typically see negative seasonality on originations due to the holiday season. With that in mind, we expect to deliver originations of $2,500,000,000 to $2,600,000,000 up 35% to 41% year over year respectively. Our outlook for pre provision net revenue is 90,000,000 to $100,000,000 up 21% to 35% respectively.

Our outlook assumes two interest rate cuts in Q4 and includes increased investment in marketing to test channel expansion, which will support originations growth in future quarters. We expect to deliver an ROTCE in the range of 10% to 11.5 more than triple year over year. We will provide additional details on our strategic and financial framework at our Investor Day on November 5, where we hope you will join us. With that, we’ll open it up for q and a.

Conference Operator: We will now begin the question and answer session. A reminder that if you would like to ask a question, please raise your hand now. And if you have dialed in to today’s call, please press 9 to raise your hand Your first question comes from the line of Bill Ryan with Seaport Research Partners. Your line is open. Please go ahead.

Artem Nelavaiko, Head of Investor Relations, LendingClub: Bill, I think you’re on mute.

Bill Ryan, Analyst, Seaport Research Partners: Got it. Thanks. So first question, just want to ask about the disposition plans looking at the future between your various channels structured certificate, whole loans and extended seasoning and what your plans are to continue to grow the help for investment portfolio on the balance sheet. Looks like there’s a little bit of mix shift last couple of quarters dialing back on the whole loan sales focusing on the other two. And if you could also kind of maybe talk about the economics of what you’re seeing between the various disposition channels?

Drew Ben, CFO, LendingClub: Yes. Great. Hey, Bill. Thanks for the question. So for HFI for Q4, it’s kinda steady as she goes in terms of what we plan each quarter.

So we’re targeting, you know, roughly 500,000,000 in HFI, and that sort of just depends on how the quarter evolves. Sometimes that that’s a little higher or a little lower. I’d say, generally, it’s been a little higher the past couple quarters. The other programs are are roughly in line with where we’ve been for the past couple quarters. We we see demand for structured certificates being constant.

You know, we’re seeing good pickup in the rated product as well, and we as I mentioned, we should we sold one of those out of extended seasoning this quarter, a a rated deal that is. So demand is demand is strong and still there. And with issuance being targeted to be roughly the same kind of the the mix and disposition should also be roughly the same. I guess just, Bill, to make sure you’re tracking, you probably are

Scott Sanborn, CEO, LendingClub: that, you know, not all of these sales are equal. In in historically, whole loan sales to banks would come at a different price than, say, whole loan sales to to an asset manager. As the insurance rated transactions have been coming in, those prices, as we mentioned in the script, are really approaching bank prices now. And in those cases, we’re generally not retaining the a note. So effectively, it it is a whole loan sale, and it’s coming at a higher price.

So it’s really the the mix is based on where we’re getting best execution, as and, you know, we are looking to develop certain channels. So that’s a channel we’re developing, and it’s going in the direction we like, which is building demand and and higher prices there.

Bill Ryan, Analyst, Seaport Research Partners: Okay. Thanks, Scott. And just one big picture follow-up. If you can maybe kinda touch on the competitive state of the market. I mean, origination volumes have increased quite a bit across the board.

You’ve heard about some companies maybe have opened up their credit boxes a little bit, some with product structure, if you will, fixed income investors allocating more capital to sector. I mean, you could kind of give us an overview of of have you seen any pressure on your underwriting standards at all?

Scott Sanborn, CEO, LendingClub: No. We haven’t. I’d say, you know, as we say every quarter, this has always been a competitive space. In our case, our growth is coming off of a low, and it’s coming off of a low that’s been informed not not just by tighter credit underwriting, which, you know, we’re maintaining the discipline there, but also because we just pulled back on marketing. So our ability to grow is if you still look at, you know, where you can see volume levels, you’ll see we’re still running below historical historical levels of of spend and and volume in a TAM that’s larger than it ever was.

So we’re not seeing the space is competitive. It it’s no more competitive than it was last quarter or the quarter before. As usual, we see a mix in who we’re competing with in different environments. So when the interest rate environment shifted, we were competing more with banks and less with fintechs. I’d say now we’re competing a bit more with fintechs and a little bit less with some of the banks, but it doesn’t it it’s not changing, certainly not affecting our underwriting standards.

And, you know, we’re we are absolutely, in this for the long game. And as you know, we’re we’re eating our own cooking here, so we are we are looking to make sure we are delivering the returns for ourselves as well as for our our loan buyers. And we don’t view the way we get rewarded long term is by posting a temporary jump in growth through short term decision making on credit.

Bill Ryan, Analyst, Seaport Research Partners: Okay. Thanks for taking my questions.

Conference Operator: The next question comes from the line of Tim Switzer with KBW. Tim, your line is open. Please go ahead.

Tim Switzer, Analyst, KBW: Hey, good afternoon. Thanks for taking my questions. My first one is, can you explain what drove the higher loss in the net fair value adjustment? And I think you mentioned earlier on the call that pricing seems to be holding up on loan sales. So just curious what drove that adjustment line.

Drew Ben, CFO, LendingClub: Yeah. So I I keep in mind, we had a a a positive fair value adjustment in q two that I I believe was about $9,000,000 in the quarter, and we had 5,000,000 this quarter. So positive adjustments in both quarters, but it was larger in q two than it was in q three. And so that’s a that’s a big part of the delta right there. You know, as I as we said, prices moved up a little bit, so it’s not price that’s that’s driving that.

The other piece is as we have a larger extended seasoning portfolio, there is natural roll down that happens, and that comes through that net fair value adjustment line. So that’s also a little bit of the change that we’re seeing quarter over quarter. It’s just a larger portfolio.

Tim Switzer, Analyst, KBW: Got you. Is there a good way for us to be able to model the impact of the extended seasoning portfolio?

Drew Ben, CFO, LendingClub: There is. It’s probably a little complicated to get into the details on on this call, but we we can follow-up with you afterwards and Yeah.

Vincent Kaintic, Analyst, BTIG: Appreciate that. We can

Tim Switzer, Analyst, KBW: do it offline. Yeah. And then can you also walk us through the loan reserve dynamics a bit this quarter because it went up quite a bit. But if we look at your Slide 16 that indicates lower loss expectations for those legacy vintages. And you obviously didn’t grow the HFI book a whole lot.

So I’m just curious on, you know, what was that reserve going up for, I guess?

Drew Ben, CFO, LendingClub: Yep. So so two factors. Again, last quarter, there was a one timer that we called out in the provision line because we had a a a re estimation of the lifetime losses, and that caused a positive benefit in the provision line. And so I think that’s about 11,000,000. Right, Artem?

Yeah. 11,000,000 last quarter that, you you know, credit was great again this quarter, but we didn’t do a step change in in the reserve on the previous vintages. So that’s one factor. The other is just as we’re growing some of our businesses, like, for example, our purchase finance business into HFI, the duration’s a little longer, so it has a little higher upfront CECL charge, but also fantastic economics on balance sheet. And so those are the two main drivers.

Tim Switzer, Analyst, KBW: Gotcha. Thank you. And one last one real quick. Can you explain what what drove the increase in diluted shares? End of period went up a little bit, but not nearly as much as diluted share count.

Sorry if you said this earlier on the call.

Drew Ben, CFO, LendingClub: Yeah. No. I think share price is probably the biggest Right? If you just do the treasury if you just think of the treasury stock method on the diluted shares, the higher the share price, the more dilution you effectively get on the outstanding, you know, grants that have been issued. So there wasn’t there was no step change in terms of kind of the, you know, the vehicles that caused diluted share count.

Tim Switzer, Analyst, KBW: Got you. Alright. Thank you.

Conference Operator: Thank you. Your next question comes from the line of Giuliano Bologna. Your line is open. Please go ahead. Giuliano, your line is open.

Please go ahead.

Artem Nelavaiko, Head of Investor Relations, LendingClub: Giuliano, I think you’re on mute too.

Conference Operator: K. We can come back to Giuliano. We’ll move on

Drew Ben, CFO, LendingClub: to

Conference Operator: Vincent Kaintic of BTIG. Your line is open. Please go ahead.

Vincent Kaintic, Analyst, BTIG: Hi, Greg. Can you hear me?

Scott Sanborn, CEO, LendingClub: Yes.

Vincent Kaintic, Analyst, BTIG: Yes. Having some tech issues. I have a feeling maybe others are as well. But yeah. So thank you for taking my questions.

First question, kind of a follow-up on that that funding side. And I wanna ask it, kind of the demand for, you know, your your marketplace loans, the structure ticket certificates and and the seasoned portfolio. It it’s great to see that there’s so much demand. You know, I think a lot of there’s been a lot of investor questions, over the past months where we’ve seen some other companies, have some issues, some bankruptcies, so forth. And so there’s been some concerns broadly about institutional investor appetite for fintech originated loans.

So it looks like your demand is great. And I was wondering if you can maybe talk about kind of the broad industry and if you’re seeing any any differentiation. And if maybe that’s a competitive advantage of your funding vehicles and mechanisms versus the rest of the industry. Thank you.

Drew Ben, CFO, LendingClub: Yeah. So there thanks for the question, Vincent. A lot there. So I I’d say, first of all, the comments I’m gonna make are really just focused on our asset class in our industry, so not, you know, auto securitizations or any of the other things that are that are going on. But, you know, we just actually our our team was just at a a conference yesterday talking to, you know, loan current investors and and potential investors, and I’d say the appetite is still very strong.

I don’t think there’s any fade on the appetite at all for, you know, the various vehicles that are out there, whether it’s a structured product, the rated product, or, you know, whole loans out of extended seasoning. So demand demand is definitely there. I think track record matters. So the demand is there for us. I think it’s certainly there for other issuers as well.

But I but I’d say on the margin that issuers are also being maybe slightly more cautious on who they’re partnering with, and and we’re hearing that. And we’ve been the partner of choice for years and I think continue to be. So I think that that plays to our advantage. Obviously, we’re always watching the ABS markets to see if there’s any, you know, major disruption there and haven’t seen much. Certainly, there there’s been a little noise as you indicated over the past couple weeks, but summary demand remains good.

Prices are strong, so we’re feeling we’re feeling good going into the fourth quarter.

Vincent Kaintic, Analyst, BTIG: Okay. Great. Thank you. That’s very helpful. And I guess This one also oh, go ahead.

Scott Sanborn, CEO, LendingClub: One thing just a little added color is we’re certainly hearing that some capital providers are further narrowing their selection of who they’re working with. But, you know, hard for us to kinda but, you know, we we we remain in the wallet and remain a really primary and important partner there, but certainly hearing some chatter of that.

Vincent Kaintic, Analyst, BTIG: Okay. Great. That that’s super helpful. Thank you. And, actually, kind of related to, you know, the the volatility we’ve been hearing over the past month just in broader consumer credit.

Just wondering if you could talk about, you know, your your credit performance and what you’re seeing. So it it was great to see charge offs 2.9% this quarter. That’s great. I’m just wondering if you’re noticing maybe not in the the loans that you’re you’re that are on your, balance sheet already, but as you get applications, maybe has the quality of that changed? Are you noticing maybe any themes in terms of delinquency evolution, like, maybe with lower credit tiers or any anything any comments you might see be seeing with that relative to past trend?

Scott Sanborn, CEO, LendingClub: Yeah. No. I mean, I’d say for us, you know, reminder, we remain very, very restrictive compared to, you know, pre COVID, and that is even more so the case in sort of the lower credit area. So I acknowledge there’s definitely been a decent amount of press about a bifurcated economy and, you know, where, you know, certain subsets of consumers could be struggling. But, you know, in our portfolio, given how we’re underwriting today I mean, just for an example, there’s talk about, you know, consumers are in less than 50 k a year.

I think that represents 5% of our originations right now. So very, very small. Same thing with, you know, student loans. As you know, we’ve restricted underwriting to that group. So the percent of people that are, you know, delinquent on a student loan and current on us is is, you know, now measured in in basis points and is shrinking.

So we, on our book, aren’t seeing anything more than the normal kinda, you know, variability that you adapt and continue to manage to, which we’re you know, our platform is set up and our team is set up to do that quite well. So no not you know, no kinda broad themes despite again, we we’re reading the same thing you are, but we’re not seeing it in our book, and I think that’s based on how we’re underwriting.

Vincent Kaintic, Analyst, BTIG: Great. Thanks. And maybe I’ll stick one more in, and this might end up having to be for the the investor meeting. We wanna leave some some meat on there. But, your CET one of 18%, is very healthy.

I’m just wondering, how much is too much. Thank you.

Drew Ben, CFO, LendingClub: Yeah. We’ll we’ll see you in November.

Vincent Kaintic, Analyst, BTIG: Okay. Sounds good. Alright.

Tim Switzer, Analyst, KBW: Thanks, guys.

Giuliano Bologna, Analyst, Compass Point: I appreciate it.

Scott Sanborn, CEO, LendingClub: See you

Drew Ben, CFO, LendingClub: then. In in in all in all seriousness, I think, what what you know, a little bit on that is, again, we’re we we do have what what we would say is some excess capital, and, you know, our plan is to use that for growing the balance sheet as we ramp up originations. And, you know, if we have enough capital to satisfy that primary goal and more more than enough after that, then I think we’ll consider other options.

Vincent Kaintic, Analyst, BTIG: Okay. Great. And see you in November 5. Thanks very much. Thanks.

Conference Operator: Okay. Thank you. Our next question comes from Giuliano Bologna from Compass Point. Your line is now open.

Giuliano Bologna, Analyst, Compass Point: Sounds good. Hopefully, you guys can hear me now. I got the unmute notification this time. Congratulations on a great quarter. It’s great to see that, you know, continued, you know, great results.

When I look forward, I mean, there’s obviously a tremendous amount of demand, you know, through the marketplace, whether it’s structured certificates or whole loan sales. You know, I’m curious in a sense, you know, how much more do you think you’d want to grow that versus grow the kind of overall HFI pie? Because the outlook is, call it, 45% between HFI and extended seasoning, which is a pretty healthy amount, and it looks like that could keep growing balances. But just trying to think about, you know, how you think about the balance going forward because you have a lot of dry powder, a lot of liquidity, and a a lot of capital to kind of keep pushing. So I’m curious how you think about, you know, how much you do wanna, you know, push both sides there.

Yeah. Yeah.

Drew Ben, CFO, LendingClub: And we’ll we’ll get into this more at investor day. So but to to give you an answer now for, you know, for q four, the or even long term. I mean, the end goal is to grow originations enough that we can feed our all of our desires to grow the balance sheet, and we can feed all the investors in the marketplace that, you know, are playing paying the appropriate price for for the loans we’re originating. So our goal is to be able to do both. And then, you know, if we’re not quite there on total originations, then it’s a bit of a balancing act.

Right? We’re we still wanna see healthy growth on the balance sheet, but we originate loans that are better off in the marketplace on the balance sheet, and we’re going to sell those. And we have long term investors that we want to keep our relationship with, and so we’re gonna make sure we’re able to allocate to them as well. So, you know, always a bit of a balancing act while we’re still ramping originations. End goal is we have enough originations to feed both sides.

Giuliano Bologna, Analyst, Compass Point: That’s very helpful. One thing I’m curious about, when I look at your marketing spend, you know, as a percentage of volume, it, you know, came up a little bit, but it’s still, you know, much lower than I would’ve expected, you know, given that you’re pushing some new marketing channels. I mean, I’m calculating it, you know, 1.55%, 1.553%. You know, you obviously, you know, highlighted that you’re gonna push a little bit more harder on the marketing side in April, you know, in anticipation of, you know, growth in ’26. You know, it looks like, you know, I mean, HFI was down, so there should be, you know, a little bit less of a benefit from more, you know, capitalization or amortization of that through, you know, on HFI.

But it seems like that’s, you know, continued to be very efficient, you know, from a, you know, percentage of volume perspective. I’m just curious, you know, how I should think about that, you know, going over going forward over the next few quarters.

Scott Sanborn, CEO, LendingClub: Yeah. So as I mentioned, I think we you know, excitedly, I’d say we still see a lot of opportunity there. Right? We are we are coming from a place of reasonably low activity into a market that I think is a pretty attractive in terms of the value proposition to the consumer and the experience we’ve got. We you know, it’s our efforts are working well.

We are still I mean, we’re only two quarters into restarting direct mail as an example. We’re on the third version of our response model. We will be on our fourth as we exit the year, you know, building the creative optimization library, optimizing the experience, and, you know, then take that across some of the other channels like digital and all the rest. So we still have a lot of opportunity in front of us. I think what you’re also seeing in q three is not just the performance of those channels being, you know, positive, but also some of our other efforts.

I I touched on it in in my prepared remarks that our other we are growing we you know, we delivered 37% growth year on year. That was both in new and in repeat marketing over indexes to driving new, but repeat is coming at a, you know, much lower much lower cost. So our ability to scale that at, an equivalent pace, we’re still at fifty fifty despite the big jump in year on year marketing spend. We’re still we’re still, you know, drive roughly fifty fifty with new versus repeat. So both both of those efforts are working in the external marketing efforts and then the efforts to drive repeat and lifetime value from our from our customers.

Giuliano Bologna, Analyst, Compass Point: That’s very, very helpful. I appreciate it. And, yeah, congrats on the continued performance. I’m looking forward to seeing you guys, you know, in a couple weeks. Great.

Thanks, Juliano.

Conference Operator: Thank you. And your next question comes from Reggie Smith of JPMorgan. Your line is open. Please go ahead. Reggie, your line is open.

Vincent Kaintic, Analyst, BTIG: You’re on mute, Reggie.

Reggie Smith, Analyst, JPMorgan: There we go. Can you hear me now? Yes. I’m sorry. I wanted to follow-up on the, on the last question.

So, you know, kinda thinking about marketing, you know, obviously, it costs less to to reengage a previous customer. I guess, thinking about that expense ratio, you know, the 1.5 that we see on the income statement, my sense is that it’s not evenly distributed and that, you know, maybe your incremental or your your marginal loan is a little bit more. Help me understand, I guess, how inefficient that is or or where where is the marginal cost to underwrite a loan and then maybe frame that against what you could sell one for? Like, it’s my my sense and my gut is that despite the fact that that your marketing channels are not optimized, that it’s still, there’s still room there to kinda kinda go, almost as though you’re leaving money on the table possibly. Not in a bad way, but just just thinking about the opportunity there.

So maybe talk a little bit about what the marginal cost to acquire, a new loan is and then maybe frame that against, you know, what you can sell these loans for. Looks like origination, your marketplace ratio is about 5%. So there seems to be a lot of room there. But anything you could share there would be great. Thank you.

Scott Sanborn, CEO, LendingClub: Yeah. So you’re you’re certainly thinking about it the right way. We’re underwriting to a marginal cost of acquisition that reflects the lifetime value of the customer. And, you know, the part of this process you know, but and what we are very, very focused on is profitable, sustainable growth. Right?

We’re not looking to just post, inefficient volume that we can’t rinse and repeat and drive further. So, as we push into these new channels, we’re we’re we’ll find that efficient frontier, and then we work to basically bring it in, right, by improving our targeting models, improving our creative and response rates, improving our pull through on the experience and the conversion rate on the experience so that we can then go deeper and push harder in those channels. So I think you’re right that we have more room to go, but it is it is very mathematically and or scientifically backed. Right? It’s, we’ve got a very good handle on what we can expect to get, from our customers.

Now that that number is going up, right, as we and we’ll share a little bit more information on this. But as we get better and better, you know, these repeat customers are not only lower cost to acquire, they’re also lower credit loss. And, oh, by the way, if we get you back once, it’s likely we’re gonna get you back three or four times. So you you know, there really is a real long term benefit here that will drive up the lifetime value, which will drive up our ability to pay up at acquisition, but we’re building towards it, and we’re building towards it incrementally every quarter.

Reggie Smith, Analyst, JPMorgan: That makes sense. If I could sneak one more in, I’d love to hear more about the BlackRock program and and the insurance, sales channel. If I’m thinking about that right, I guess this is a way for kind of civilians to get exposure to these types of, notes. Like, how’s liquidity the the liquidity there for the consumer? Are they able to sell that stuff back?

Like, how does that kinda work? And then on the insurance side, like, do you think we’ll get to a point where you’re announcing, you know, a committed number from from the insurance channel like you do for, you know, kind of private credit today?

Vincent Kaintic, Analyst, BTIG: Thank you.

Drew Ben, CFO, LendingClub: Yeah. So so a couple of things there. One, this is not this is not direct to consumer sales that’s happening. It this is really, you know, in the BlackRock example, I think they have many different ways that they may, you know, represent other clients where they’re managing money to purchase this program. So I I wouldn’t wanna box it into just one use case for them, but it’s not a, you know, direct or indirect to consumer investors that’s that’s happening in any way.

The I think the insurance pool is extremely deep. And so the you know, these are insurance companies who are taking premiums for various insurance policies and investing that money. And so, you know, it’s it’s it’s a massive pool. It is, as Scott was saying, it usually, the price is not quite as good as banks, but, generally, it’s still very low cost of capital. And so we think we can make progress in terms of growing that channel and helping our overall average price that we’re selling loans at as well.

Reggie Smith, Analyst, JPMorgan: And and I guess on the direct to consumer point, is that possible? I could maybe that was BlackRock, but is that, a a channel that one day be a thing, or or are there things that prevent that regulatory wise that would prevent that or make that difficult?

Scott Sanborn, CEO, LendingClub: So there are it there is capital in our loan book today that is provided by individuals. It’s usually coming through funds that are managed by RIAs at some of the wealth managers and and, you know, hedge funds and all the rest. So there is private individual investor capital coming in to purchase the asset. So that’s one. Going direct to consumer retail would be, you know, going back to our original model.

And if you recall, you know, it is doable. The then the loans become securities, which comes with a lot of overhead and disclosure requirements. And we, we have been able to operate a much better business, without that because we’re what I mean by that is you we are required to announce when we make pricing changes. We’re required to announce when we make credit changes. We had all of our competition downloading our publicly available data and using it to compete against us because we had to tell them what we were doing.

So I it’s not something I would gladly go back to in that old in that old structure, but certainly high net worth individual through funds is is a source of capital today.

Reggie Smith, Analyst, JPMorgan: I was thinking about how I would love to, to pick up some yield, versus what I get in my savings account now. So I think I think there’s something there. I don’t know.

Scott Sanborn, CEO, LendingClub: Yeah. We can help you out.

Reggie Smith, Analyst, JPMorgan: Thanks a lot. Listen. Great quarter, guys. We’ll talk soon.

Drew Ben, CFO, LendingClub: Thanks. Thanks.

Conference Operator: Thank you. Our next question comes from Kyle Joseph of Stephens. Your line is open. Please go ahead.

Kyle Joseph, Analyst, Stephens: Hey, good afternoon. Thanks for taking my questions. You guys have touched on this a bit, but just Slide 10 and kind of the delinquency trends amongst, FICO bands, obviously, at least amongst the competitor set, you saw a pretty big increase, on the lower band there. Just give us a sense for, you know, how you’re how that impacts your originations and investor demand and and, you know, where where you’re seeing kind of the best bang for your buck in term across the FICO band score.

Scott Sanborn, CEO, LendingClub: Yeah. So that doesn’t directly affect us as I touched on before. You know, we’re certainly hearing some chatter about maybe people consolidating with a smaller handful of originators that have, you know, shown themselves to have more stable and predictable performance. What, you know, we’re always looking at is what does the application profile look like coming at us. Is it shifting?

Is it shifting in a way we like or we don’t like? So, you know, when you see an uptick like that, it’s generally gonna result in somebody else pulling back. It’s we don’t know. Is that one platform, two, three? Like, hard for us to say, but what we’ll be monitoring and adapting to is making sure we continue to get a consistent through the door population and that that we want.

And because that may provide some opportunity. It might provide some risk, and that’s part of, you know, what our our day job is.

Kyle Joseph, Analyst, Stephens: Got it. Helpful. And then just one follow-up for me. Talk talked a lot about marketing expenses today, but just, you know, in imagine you’ll cover this at the, investor day as well, but just, you know, a a sense for the, operating leverage you have on on the remaining expense items.

Drew Ben, CFO, LendingClub: Yeah. We so we think it’s pretty significant. We will get into it more in Investor Day. I think you can already see it happening right now in terms of, you know, the revenue growth we’ve produced year over year compared to expenses. And that yeah.

It’s certainly not to say that other expenses won’t go up as we grow the company, but I think marketing is where you’ll see the most variable cost as as we scale up.

Kyle Joseph, Analyst, Stephens: Got it. That’s it for me. Thanks very much for taking my questions.

Vincent Kaintic, Analyst, BTIG: Thank you.

Conference Operator: Thank you for your questions. I will now turn the call to Artem for some questions via email.

Artem Nelavaiko, Head of Investor Relations, LendingClub: All right. Thanks, Kevin. So Scott and Drew, we’ve got a couple questions here that were submitted by our retail investors. First question is, we noticed a difference in origination growth rate across issuers and originators. You know, to what do you attribute the the differences in growth?

Scott Sanborn, CEO, LendingClub: Yeah. So first, thanks to all the retail investors for for submitting. I understand from Ordham that we got quite a few this quarter, so that’s that’s great. Yeah. As we talked about on the call, not not all originations are created equal.

Our focus is on profitable, sustainable originations growth. And, you know, I think 37% growth in originations to a level that’s, you know, really getting close to our highest over the last several years is also coming with record high pretax net income and also coming with outperformance on credit by roughly 40%. So it’s we’re not just looking at one number, which is dollars originated year on year. We’re looking at a combined balance of what we think makes for a sustainable, profitable business.

Artem Nelavaiko, Head of Investor Relations, LendingClub: Perfect. Alright. Second question. You talked a little bit about potential rebrand, coming up. Any updates on the status?

Scott Sanborn, CEO, LendingClub: Yep. I’m only talking about it because you all keep asking. But I I would say we’re yes. We are we are, we’ve done quite a bit of work this year, and we’re in the final stages of the, let’s call it, the research and development phase and landing on, you know, where we wanna take it. It’s very excited about it.

We’re now entering the planning and execution phase, which we’re gonna be pretty deliberate about as it won’t surprise anyone on this call. We built up equity in this brand after almost twenty years. We think a new brand will give us a broader permission set with our customer base and and kinda create new opportunities for us, but we gotta make sure we don’t lose the, you know, tens of thousands of positive reviews and awards and our conversion rate that we finally honed across all these channels, and so lots of work to do. So when will it be, you know, out in the ether? Will be probably of next year.

Don’t hold me to that date exactly, but we’re doing the planning phase to make sure we know exactly what we’re gonna get and can support it with the the, you know, marketing oomph that it it’s gonna need to be successful.

Artem Nelavaiko, Head of Investor Relations, LendingClub: Alright. Perfect. And last question. Just any updates on the the product road map or launching any new products?

Scott Sanborn, CEO, LendingClub: Yeah. So, obviously, this year, as we’ve been getting back to growth, we’ve also been, you know, expanding our ambitions on the product mix. We talked about level up checking on the call today. Level up savings has been a big driver, which I think Drew talked about, that IQ this year. So there is absolutely more to come.

That’s part of the reason we’re we’re gonna be investing in a new brand. What I’d say is, you know, stay tuned for investor day where we’ll talk a little bit more about some, opportunities we’re gonna be pursuing in in in the years to come.

Artem Nelavaiko, Head of Investor Relations, LendingClub: Alright. Perfect. Thanks, Scott. Alright. So thank you, everyone.

With that, we’ll wrap up our third quarter earnings conference call. Thanks again for joining us today. And if you have any questions, please email us at irlendingclub dot com.

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